On April 25 and 26, 2016, the Securities and Exchange Commission ("SEC") filed two Complaints in the United States District Court for the Southern District of California ("SDCA"). The "Introduction" sections of the Complaints set forth the allegations in such a compelling fashion that there is little point in my attempting to craft a more succinct version and, as such, I commend you to the verbatim extracts below.
NOTE: A civil Complaint merely contains allegations and defendants are presumed innocent unless and until proven guilty by a preponderance of the evidence in a court of law.The Pump And Dump SchemeSecurities and Exchange Commission, Plaintiff, v. Luke C. Zouvas, Cameron F. Robb, Christopher D. Larson, Jason M. Schiprett, And Robert D. Jorgenson, Defendants. (Complaint,16-CV-0998, SDCA, April 25, 2016):I. INTRODUCTION 1. The Commission brings this action to enjoin Defendants Luke C. Zouvas ("Zouvas"), Cameron F. Robb ("Robb"), Christopher D. Larson ("Larson"), Jason M. Schiprett ("Schiprett") and Robert D. Jorgenson ("Jorgenson") from violating the antifraud provisions of the federal securities laws. From no later than December 2011 through at least December 2012, Defendants engaged in a "pump-and-dump" scheme to manipulate the market for the stock of Crown Dynamics Corp. ("Crown"), a publicly-traded shell company. 2. As part of the scheme, Larson obtained controlling shares of Crown from Asher Z. Zwebner ("Zwebner"), an Israeli accountant who created and secretly controlled the company and its stock. Although Larson controlled Crown and acted as its de facto chief financial officer, his name did not appear in any of Crown's filings with the Commission. With the assistance of Zouvas, an attorney based in San Diego who served as Crown's general counsel, Larson transferred free-trading Crown shares from Zwebner's nominees - purported shareholders in Crown's initial public offering - to Larson's nominees, including Jorgenson and Schiprett. Larson then paid $400,000 for a "call center" to promote Crown and placed manipulative trades in his own brokerage account to create the appearance of market interest in the stock. Robb prepared materially misleading press releases about the company's business success. As Crown's stock price became inflated as a result of Larson's and Robb's efforts to pump the stock, Larson's nominees Jorgenson and Schiprett sold Crown shares and wired most of the sale proceeds - at least $865,000 - to accounts controlled by Larson. Jorgenson and Schiprett retained some of the proceeds as compensation for their assistance in the scheme as nominees. 3. As a result of the conduct alleged in this Complaint, Defendants violated Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77(q)(a)(1) and 77(q)(a)(3); and Section 10(b) and Rules 10b- 5(a) and 10b-5(c) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b) and 17 C.F.R. §§ 240.10b-5(a) and 240.10b-5(c). Unless restrained and enjoined, Defendants are reasonably likely to continue to violate the federal securities laws.Sham IPO Using Publicly Traded ShellSecurities and Exchange Commission, Plaintiff, v. Asher Z. Zwebner, Defendant (Complaint, 16-CV-1014, SDCA, April 26, 2016):
I. INTRODUCTION 1. The Commission brings this action to enjoin Defendant Asher Z. Zwebner ("Zwebner") from violating the antifraud provisions of the federal securities laws. From no later than September 2010 through December 2011, Zwebner engaged in a scheme to create a publicly-traded shell company, Crown Dynamics Corp. ("Crown"), through a sham registered initial public offering ("IPO").2. Zwebner secretly controlled every aspect of Crown's registration and the IPO. He filed a false Form S-1 registration statement with the Commission on behalf of the company, and after the registration became effective, placed Crown's free-trading shares with nominees residing in Israel, most of whom were unaware of their role as nominees. Zwebner then gained physical control of their stock certificates. He subsequently engaged a U.S. broker-dealer to submit to the Financial Industry Regulatory Authority ("FINRA") a false Form 15c2-11under Rule 15c2-11 of the Exchange Act, 17 CFR § 240.15c2-11, so that Crown's common stock would be quoted on the Over-the-Counter Bulletin Board ("OTCBB") and the OTC Link (an SEC-registered Alternative Trading System). 3. Throughout the registration process, Zwebner omitted to disclose his control over Crown, made false statements about Crown's business purpose and plans, and used unwitting nominees as the purported IPO purchasers. After Zwebner registered Crown's offering and arranged for its stock to trade on the OTCBB and on OTC Link, he secretly sold the Crown shell to stock promoter Christopher D. Larson ("Larson"). 4. As a result of the conduct alleged in this Complaint, Zwebner violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77(q)(a); and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5. Unless restrained and enjoined, Zwebner is reasonably likely to continue to violate the federal securities laws.READ:
The Zouvas Complaint
The Zwebner Complaint